China quake damage estimated at $20B
Insured losses may only be 5% of total, a risk assessment firm says. And it's not clear that Americans, in a troubled economy, will donate the sums needed to help rebuild.
NEW YORK (CNNMoney.com) -- The earthquake that struck China's Sichuan Province this week, killing thousands of people, caused an estimated $20 billion in damage - most of it uncovered by insurance, a catastrophic risk modeling firm said Wednesday.
And given the precarious state of the U.S. economy, aid agencies say the ability of Americans to help the Chinese people recover and rebuild may be limited.
China's Xinhua news agency reported Wednesday that the death toll from the quake - which measured 7.9 on the Richter scale - had risen to 14,866. An unofficial tally of deaths in individual communities - as reported by the news agency over several days - puts the toll at 19,565, with thousands more said to be trapped or missing.
Though the risk modeling firm, AIR Worldwide, cautioned that there is a high level of uncertainty in insured loss estimates in China, they believe only $1 billion of that - 5% of the total assessment - is in insured damage.
By contrast, the tornadoes that swept through the middle part of the United States last week caused in excess of $1 billion in insurance claims, and the bill for 2005's Hurricane Katrina was about $40 billion.
"That [$1 billion] is a very low claim - imagine if only 5% of America had home insurance," said Robert Hunter, the director of insurance for the Consumer Federation of America. "The problem is most foreign countries don't have insurance."
AIR, which estimates the total property value in the area is about $215 billion, said the insurance market is still developing in China. Earthquake coverage remains optional for both residents and commercial businesses.
But with a slumping economy in the United States, some charitable giving experts are worried that U.S. donations will not meet the vast need for repairs to uninsured property.
"Charitable giving does follow the economy, and the tightening of the economy has impacted the donations our organizations receive, " said Sam Worthington, president and CEO of disaster relief coalition InterAction.
According to a study conducted by philanthropy group Giving USA, charitable giving during recessions has failed to keep pace with inflation. But the dropoff is not as staggering as some may think. In the five U.S. recessions since the one between 1973 and 1975, giving fell an average of only 1.3% adjusted for inflation.
Aid group CARE, which has disaster relief workers stationed in Myanmar, said that it has seen a slight drop in overall fundraising due to the slowdown in the economy. The Southeast Asian country was hit May 3 by a cyclone that killed more than 30,000 people, according to Myanmar government estimates.
"We can't say for certain, since there are other factors, but we can't imagine it's not having an effect," said CARE spokeswoman Lurma Rackley.
But disaster relief group Mercy Corps, which collects donations for the Sichuan earthquake, says donations have surpassed expectations - particularly from people with direct or ancestral ties to China.
"Conventional wisdom says that recessionary fundraising may fall as much as 5%," said Mercy Corps communications director Jeremy Barnacle. "But we've seen a robust response, especially from the Chinese diaspora."
Mercy Corps raised $10 million in private funds for the Pakistan earthquake of 2005, when the economy was fairing much better than it is now. Though Barnacle could not say for sure, he said the aid group is on pace to raise a similar amount for the Chinese earthquake.